IQRA UNIVERSITY

UNEMPLOYMENT IN PAKISTAN

ECONOMIC ANALYSIS SUBMITTED TO: DR. ABDUL WAHEED SUBMITTED BY: NOMAN MUNEER DATE OF SUBMISSION: 4 NOV, 2011

UNEMPLOYMENT IN PAKISTAN

AKNOWLEDGMENT
We are deeply indebted to our instructor Dr. Abdul Waheed whose help, stimulating suggestions and encouragement helped us in writing this report

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TABLE OF CONTENTS EXECUTIVE SUMMARY ......................................................................................................... 5 INTRODUCTION .................................................................................................................... 6 ANALYSIS ................................................................................................................................ 8 CAUSES OF UNEMPLOYMENT.......................................................................................... 8 1) LAW AND ORDER SITUATION .................................................................................... 8 2) CHALLENGES TO AGRICULTURAL SECTOR ........................................................... 8 3) SHORTLISTING IN INDUSTRIES DUE TO ENERGY SHORTAGE ............................ 8 4) WAR OF TERROR .......................................................................................................... 8 5) LESS FOCUS ON EDUCATION AND RESEARCH ....................................................... 9 6) INCREASE IN POPULATION ........................................................................................ 9 7) NATIONALIZATION OF INDUSTRIES......................................................................... 9 8) UNREST SITUATION OF KARACHI............................................................................. 9 9) UREALISTIC ATTITUDE TOWARDS CAREER CHOICE............................................ 9 10) LACK OF INFRASTUCTURE....................................................................................... 10 11) GREATER NUMBER OF GRADUATES THAN THE JOBS AVAILABLE ................. 10 12) LACK OF CAPITAL EXPENDITURES ........................................................................ 10 13) EDUCATION SYSTEM ................................................................................................. 10 14) REFERENCE SYSTEM ................................................................................................. 10 15) RELUCTANCE TO ORDINARY JOB ........................................................................... 11 16) LACK OF SELF EMPLOYMENT APPROACH ............................................................ 11 PSYCHOLOGICAL, ECONOMICAL AND SOCIAL EFFECTS ......................................... 11
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CURRENT SITUATION OF UNEMPLOYMENT ............................................................... 12 MEASURES TAKEN BY GOVERNMENT ......................................................................... 12 RECOMMENDATION .......................................................................................................... 14 CONCLUSION ....................................................................................................................... 14

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EXECUTIVE SUMMARY
Unemployment is one of persistent problems of Pakistan since its existence. The employment rate of Pakistan, according to the Labour force survey 2009-2010 has reached up to 5.55%. It is increasing yearly because of the growth in population. The population of Pakistan has reached to 173.54 million in 2010 and is growing 3 percent per year which means it is adding 3 million workers yearly into labour force. The 2nd biggest reason for unemployment is the law and order situation of Pakistan due to which starting a new business, setting up a new industry, investments all have become risky. The literacy rate of Pakistan is also another reason for the unemployment. Nearly 49% of people are literate in the country in which those people are also included who just know to sign and write their names. The unemployment situation has become worse after the floods in Sindh and destruction of crops because 62% people live in rural areas and their source of income is agriculture. Due to floods they were forced to shut of their factories because their crops have been destroyed and which caused unemployment for thousands of people.

Government has taken many measures to overcome this problem like in construction, services, small manufacturing industries, housing and IT, etc 2.79 million jobs were created. The Khushhali Bank provides loans up to 30,000/- to unemployed people to start their own business. Skill Development Council is established to make a skilled work force. There is one SDC in Karachi, Peshawar, Quetta, and Lahore and have trained up to 200.252 workers till now. Ministry of Labor and manpower has created overseas employment and has sent 404,454 people in 2009 and in 2010 it sent 364,685 people. Still it requires huge efforts and long term planning to overcome this problem

The objective of this report is to create a deeper understanding of the root causes, impacts of unemployment in Pakistan. It also highlights the current situation of unemployment in Pakistan to give more understanding of towards where our economy is moving.

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INTRODUCTION

International Labour Organization (ILO) defines unemployment as the number of people who are above 18 years, and are willing and to find work at certain wage rate but could not find it. There are various methods to find unemployment in the country. One of them is claimant count method in which unemployment is determined by the number of people receiving unemployment benefits. But in Pakistan there is no established system of unemployment benefits that is why in Pakistan Unemployment is determined by the number of people looking for the job but are unable to find it. A common man, who does not know the statistical methods o calculate unemployment, can tell just by observing that how sore is Pakistans unemployment situation. Population and low literacy rate are thought to be the core reasons for it. Pakistans literacy rate is just 49% and it includes those people too who can just write or sign their names. This is why Pakistan is still a developing nation.

Since Pakistan has come in being, it has been plagued by various problems. It has been more than six decades but Pakistans government could not resolve the problem of unemployment. Unemployment in Pakistan is a persistent problem which is increasing day by day.

According to the worlds unemployment table Pakistan is on 152nd rank among 199 countries. Its unemployment rate is 15.4%. One of the core reasons of unemployment in Pakistan is its population being sixth largest populations in the world. But this is just a basic reason. Other than population there are various other reasons that are not being considered.

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It is very unfortunate that despite of many years of its existence it has still not been able to create a proper education system and the good job market. That is why our economy is getting worse day by day. According to a Labour Force Survey these are the unemployment rate from 2007 to 2010.

2007-2008 UNEMPLOYMENT RATE Male Female Rural areas Urban areas Source: Labour Force Surveys 5.20% 4.31% 8.52% 4.71% 6.34%

2008-2009 5.46% 4.46% 9.00% 4.73% 7.11%

2009-2010 5.55% 4.39% 9.46% 4.82% 7.21%

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ANALYSIS
CAUSES OF UNEMPLOYMENT 1) LAW AND ORDER SITUATION: Law and order situation is the greatest contributor to the unemployment in Pakistan. Due to this reason FDI (foreign direct investment) is decreasing at a fast pace. The last years FDI was the minimum in a decade. It is because the investors are losing confidence on the political system of Pakistan and thus are avoiding investments here.

2) CHALLENGES TO AGRICULTURAL SECTOR: Pakistan is an agricultural based country as nearly 62% of the population lives in rural areas and their source of income is agriculture.. But due to floods, other climatic changes, technology backwardness and water shortage they are not able to produce as much they should be. This affects the per acre yield which causes people to lose their jobs. In 2009-2010, the growth in agriculture was only 2 % against the expected 3.8%.

3) SHORTLISTING IN INDUSTRIES DUE TO ENERGY SHORTAGE: Industries are the biggest source of employment for educated and semi educated labour. But due to energy shortage industries are not able to produce much which is increasing their cost that is why they are short listing their employees to cut their costs.

4) WAR OF TERROR: World is moving towards depression but Pakistan has to face depression as well as the war against terror. This are of terror has given a negative image to Pakistan in the international market. This is also a reason behind decrease of international investment in Pakistan. This is causing unemployment.

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5) LESS FOCUS ON EDUCATION AND RESEARCH: In order to become a developed country one has to spend on research and education but Pakistans government is not giving much attention to this sector as required. More specialized field can be created by spending on education which can increase the job opportunities. Pakistan invests just 2% of the GDP to this sector.

6) INCREASE IN POPULATION: In 2010, the population of Pakistan has reached to 173.54 million. Population is increasing and job opportunities are becoming lesser and lesser making difficult for more than half of the population to even survive. Besides negligent government, deep rooted government, poor education system,

unavailability of quality education and feudalism is also making the conditions worse.

7) NATIONALIZATION OF INDUSTRIES: Employment in private industrial sector has

decreased to its minimum because of they have transferred their capital to other countries. The reason behind this was nationalization of industries.

8) UNREST SITUATION OF KARACHI: Due to unrest situation of Karachi like strikes, bomb blasts, target killing, investors are evading to in invest in Karachi despite of the fact that Karachi is the industrial base of Pakistan.

9) UREALISTIC ATTITUDE TOWARDS CAREER CHOICE: Pakistan is among those countries which have highest number of youth but the unrealistic goals of youth are increasing unemployment in Pakistan. After educating they wait for a white collar job with high salary in a multinational firm without experience. Not only they dream unrealistic
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but they wait until they get the job of their dreams hence losing the chances to get experienced by doing the lower salary jobs for the time being and moving to high salaries after promotion or moving upwards in career path.

10) LACK OF INFRASTUCTURE: Pakistan lacks in infrastructure. Especially in the fields of energy, telecommunication and energy sector. This is an obstacle in setting a new industry.

11) GREATER NUMBER OF GRADUATES THAN THE JOBS AVAILABLE: There is a lack of planning in Pakistan. As there are greater number of graduates than the jobs available for them.

12) LACK OF CAPITAL EXPENDITURES: Despite of severe unemployment problem in Pakistan, Government is not paying due attention to this matter. It is not interested in employing capital expenditures so that the new jobs can be produced.

13) EDUCATION SYSTEM: Our education system is also responsible for unemployment. When a new field is introduce people rush to seek its education in order to get jobs but these institutions give admissions to more people than the jobs available or to be available in the country for that field.

14) REFERENCE SYSTEM: Reference system has become most popular in Pakistan for hiring. Companies ask their current employees to refer someone suitable for the job. People being asked generally take the names of the person in their families or relatives. Thats how less people searching for the job come across a vacancy and more people lose the opportunity to apply. This nepotism creates unemployment in the country.

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15) LACK OF TECHNICAL SCHOOLS AND COLLEGES: Technical schools and colleges can be a greatest solution to the problem of unemployment but Pakistans government has never paid attention to this dimension. There are only few technical schools and colleges in Pakistan. That is why the number of skilled labour is decreasing.

16) RELUCTANCE TO ORDINARY JOB: Youth does not want to do ordinary jobs or the jobs that does not suit their qualification. But they need to understand that they should not waste their time and should avail the present opportunity.

17) LACK OF SELF EMPLOYMENT APPROACH: If there is no job opportunity then people should dare to take a step and be self employed rather than sitting idle at home. It is not necessary to be employed for a company.

PSYCHOLOGICAL, ECONOMICAL AND SOCIAL EFFECTS

Unemployment affects an individual very negatively. It leads to homelessness if the family is living on rent. It also leads to many diseases like depression, mental stress, malnutrition, loss of self esteem, anxiety. Even the people who have an optimistic approach in life start thinking negatively when they are unemployed. In worse cases it leads to committing crime, taking drugs or suicide. Due to unemployment crime rate in Pakistan is increasing very rapidly. Mobile snatching has become the most common crime.

The unemployment makes the society unproductive. It happens because when people remain unemployed for greater period of time the start losing their skills and hence become unproductive. On the other hand unemployment means the economy is not using its all human resources. When less people are employed then the output also becomes less and it effects the GDP of Pakistan. Unemployment also decreases the standard of living of a society. Since they do not have money they cannot take
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part in cultural activities and therefore lose their social life. Due to crimes in the society which has high unemployment, people start living in fear.

CURRENT SITUATION OF UNEMPLOYMENT The unemployment rate in Pakistan has recently increased even more when on 20 Nov, 2011 ginning factories shut down. They finished their businesses because of the devastating flood and its destruction to their crop cotton. These factories were located in Lower Sindh which includes Badin, Nawab Shah, Hyderabad, Mirpur Khas, Tando Allahyar, Tando Adam, Sanghar, Jhol, and Shadadpur. These factories were in hundreds of number. And few other ginning factories will be closed in the near future. The farmers got Rs 7 billion to purchase phutti but unfortunately due to flood 75 percent of their crops have been destroyed.

On the other hand circular debt of Pakistan in energy sector of Pakistan is increasing very rapidly and has reached up to 258.5 billion is increasing monthly at the rate of Rs. 5 to 10 billion. That is why oil and gas companies are short listing employees to save their cost which is increasing unemployment rate. So currently the problem of unemployment is getting worse and is expected to grow in the future.

MEASURES TAKEN BY GOVERNMENT According to Ministry of Labour and Manpower, Government of Pakistan, has taken following steps in to resolve the problem of unemployment in Pakistan:  The government will generate employment from those sectors which are capable of generating employment like, construction, services, small manufacturing industries, housing and IT, etc. According to the Labour Force latest Surveys available, from 2007-08 and 200910, 2.79 million jobs were created.  Government has started the construction of one million houses and regularization of Kachi Abadis which will give employment to many people in the construction field and housing

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related fields because there are more than 40 industries that manufacture bricks, cement, steel, marble, wood products, hardware, iron pipes, plastic ware, paints.  To accelerate the economic growth, The Public Sector Developmental Plan allocation is increased by government from Rs. 646 billion to Rs.663 billion in 2010-2011.  To overcome the water shortage in agricultural sector, many projects have been initiated like raising the crest of Mangla Dam and construction of Gomal Zam Dam, Mirani Dam, Subak Zai Dam, Basha Dam and Sat Para Dam. Canals like Rainee, Thal, Kachi can now take water to those areas which were uncultivated which can increase employment there in long run.  The Khushhali Bank provides loans up to 30,000/- to unemployed people to start their own business.  Skill Development Council is established to make a skilled work force. There is one SDC in Karachi, Peshawar, Quetta, and Lahore. They have trained up to 200.252 workers till now.  Ministry of Labor and manpower has created overseas employment and has sent 404,454 people in 2009 and in 2010 it sent 364,685 people.  An allocation of Rs. 0.72 billion was given to IT sector in 2010-2011 as it has the greatest potential to provide jobs and grow.  The land less Haris were given 43,644 Acres of land in 2010 in Sindh to cultivate.  The Prime Minister has announced Aghaze Haqooq-e-Balochistan package which will provide training of Auto Mechanic, Auto Electrician, Welder, Steel Fixer, Surveyor, Quantity Surveyor, Plumber, Draftsman (Civil), Draftsman Auto-Cad (Civil) and Crane operator, etc. At Islamabad and Karachi Centers to 5000 matriculate people from all over Baluchistan.
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 In National Internship Program Rs. 3.6 billion have been invested in 2011. It provides internship of one year to unemployed postgraduates on Rs. 10,000 salary.

RECOMMENDATION  Government should take some revolutionary steps to attract FDI by improving law and order in the country.  Government should make implement an economic revival package to stimulate investments.  Tax base and tariffs should be lowered to promote exports.  The annual growth rate of Pakistans population is 3 percent and 3 million workers are added into labor force yearly. So, government should bring new job opportunities continuously and should work on reducing population by family planning.  Education system should be improved. Institution should see the demand of the graduates in market and then should give admissions accordingly so people getting degree are also able to find the job in their respective field.

CONCLUSION: The biggest cause of unemployment in Pakistan is the law and order situation of the country. People who want to get self employed dont want to take risk and start their work in the unrest situation of the country. People fear to invest here or start a new industry because of the unfavorable law and order situation and the economic unrest. If only the law and order situation is improved in Pakistan, more than half of the unemployment will be finished. Government should take serious measures to improve this situation. But it can be done by long term planning of government and for its implementation law and order situation of the country should be improved first.

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REFERENCES

 http://202.83.164.27/wps/portal/Molmop/!ut/p/c0/04_SB8K8xLLM9MSSzPy8xBz9CP0os_hQN68A
Z3dnIwML82BTAyNXTz9jE0NfQwNfA_2CbEdFAA2MC_Y!/?PC_7_UFJPCGC20OUQE

 http://www.yespakistan.com/education/help_unemployed.asp  http://nayyab.wordpress.com/2010/05/08/rising-unemployment-in-pakistan/  http://bx.businessweek.com/pakistan/view?url=http%3A%2F%2Fwww.blurtit.com%2Fq1331570.ht

ml

 http://www.oppapers.com/essays/Reasons-For-Unemployment-In-Pakistan/309041?topic  http://www.ask.com/questions-about/Causes-of-Unemployment-in-Pakistan  http://www.einfopedia.com/causes-of-unemployment-in-pakistan.php  http://en.wikipedia.org/wiki/Economy_of_Pakistan

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